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Last month at a university lecture in Kolkata, India, the Dalai Lama declared that, when it comes to “socio-economic theory”, he is a Marxist. His reasoning was as follows:

“In capitalist countries, there is an increasing gap between the rich and the poor. In Marxism, there is emphasis on equal distribution.”

The Dalai Lama joins a growing list of religious leaders, including Pope Francis, and other global celebrities, to declare an affinity with the notion of ‘equal distribution of wealth’, an idea that is widely (but wrongly) regarded as being Marxist. A leftist influenced by Marxism does not ask, “How can wealth be distributed more equitably?” but rather “Who produces the wealth in the first place?” And: “Why does socially produced wealth end up in the hands of the owners of the means of producing it (machines, factories, raw materials, etc) rather than in the hands of those without whom it could not have been generated?”

The positive side of the publicity is that Marxism is of international interest again, as a theory that helps to understand the dynamics of capitalism. This is happening at a time when, in the advanced economies, capitalism isn’t delivering the promised goods any more and growing numbers of people are pissed off.

But, one must feel some sympathy for old Karl. His exasperation with those who adopted the brand without understanding the content led him to declare 150 years ago that “If anything is certain, it is that I myself am not a Marxist”. Marxism is not, and has never been, about the equal distribution of wealth.

‘To each according to his contribution’: Marx’s Critique of the Gotha Programme

In his Critique of the Gotha Programme, written as a letter in 1875 in response to the draft platform of the German Social Democratic Workers Party (SDAP), Marx pulled no punches when he described the idea of “fair distribution” being proposed by the SDAP as “obsolete verbal rubbish”, which ‘perverted a realistic outlook’.

He first tackles the proposal in the draft platform that “the proceeds of labor belong undiminished with equal right to all members of society” and asks: “’To all members of society’? To those who do not work as well? What remains then of the ‘undiminished’ proceeds of labor? Only to those members of society who work? What remains then of the ‘equal right’ of all members of society?”

Marx then dissects the notion of “proceeds of labor” in the sense of “a product of labor” with the co-operative proceeds “the total social product”.

“From this”, he points out, “must now be deducted: First, cover for replacement of the means of production used up. Second, additional portion for expansion of production. Third, reserve or insurance funds to provide against accidents, dislocations caused by natural calamities, etc. These deductions from the ‘undiminished’ proceeds of labor are an economic necessity, and their magnitude is to be determined according to available means and forces, and partly by computation of probabilities, but they are in no way calculable by equity”.

He continues: “There remains the other part of the total product, intended to serve as means of consumption. Before this is divided among the individuals, there has to be deducted again, from it: First, the general costs of administration not belonging to production. This part will, from the outset, be very considerably restricted in comparison with present-day society, and it diminishes in proportion as the new society develops. Second, that which is intended for the common satisfaction of needs, such as schools, health services, etc. From the outset, this part grows considerably in comparison with present-day society, and it grows in proportion as the new society develops. Third, funds for those unable to work, etc., in short, for what is included under so-called official poor relief today. Only now do we come to the ‘distribution’… to that part of the means of consumption which is divided among the individual producers of the co-operative society”.

As Marx notes, the “undiminished” proceeds of labor in the draft have now become converted into the “diminished” proceeds, “although what the producer is deprived of in his capacity as a private individual benefits him directly or indirectly in his capacity as a member of society”.

And what of the obvious and natural inequality among individual workers? “… one man is superior to another physically, or mentally, and supplies more labor in the same time, or can labor for a longer time; and labor, to serve as a measure, must be defined by its duration or intensity, otherwise it ceases to be a standard of measurement. This equal right is an unequal right for unequal labor. It recognizes no class differences, because everyone is only a worker like everyone else; but it tacitly recognizes unequal individual endowment, and thus productive capacity, as a natural privilege. It is, therefore, a right of inequality, in its content, like every right. Right, by its very nature, can consist only in the application of an equal standard; but unequal individuals (and they would not be different individuals if they were not unequal) are measurable only by an equal standard insofar as they are brought under an equal point of view, are taken from one definite side only — for instance, in the present case, are regarded only as workers and nothing more is seen in them, everything else being ignored. Further, one worker is married, another is not; one has more children than another, and so on and so forth. Thus, with an equal performance of labor, and hence an equal in the social consumption fund, one will in fact receive more than another, one will be richer than another, and so on. To avoid all these defects, right, instead of being equal, would have to be unequal”.

The Critique of the Gotha Programme is one of my favourite works by Marx. In it, he is thinking practically about how the future society based on socialism – ‘To each according to his contribution’ – and then communism – ‘From each according to his ability, to each according to his needs’ – might develop. A most important point is that the new socialist society emerges from the old capitalist one and will still be marked by the culture and habits of the past. It will not be a wholly new system simply because the old social relations have been overthrown.

Accordingly, argues Marx, the individual producer in socialist society receives back from society – after the deductions have been made – “exactly what he gives to it”. He continues: “What he has given to it is his individual quantum of labor…The same amount of labor which he has given to society in one form, he receives back in another”. Marx’s view of how this could be done involved certificates rather than money.

And, “the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values… a given amount of labor in one form is exchanged for an equal amount of labor in another form. Hence, equal right here is still in principle – bourgeois right, although principle and practice are no longer at loggerheads, while the exchange of equivalents in commodity exchange exists only on the average and not in the individual case. In spite of this advance, this equal right is still constantly stigmatized by a bourgeois limitation. The right of the producers is proportional to the labor they supply; the equality consists in the fact that measurement is made with an equal standard, labor.”

Progressive taxation as a distributive measure

It is true that in the Communist Manifesto, Marx advocated a system of “heavy progressive or graduated income” taxation, which is the way wealth is redistributed by governments, and argued about, in capitalist societies today. But progressive taxation has now been part and parcel of capitalism for more than a century. It would be absurd to regard the Prussian government of 1891, when modern progressive taxation was first introduced, as Marxist; even if Emperor Wilhelm 11 did regard himself as “king of the mob”.

Progressive taxation imposes a greater rate of tax on the wealthier income-earners. In Australia, people who earn less than $18,200 per year pay no income tax, those who earn between $18,200 and $180,000 pay (an average of) 20%, while those who earn over $180,000 pay at a rate of 45%. It can be a way of redistributing wealth downwards, as in the case of funding the Welfare State, or upwards through subsidies and ‘bail-outs’ to the capitalist class. Labor parties, or right-wing social democratic parties, are particularly good at the latter. In Australia, under the former Labor government led by Prime Minister Gillard, subsidies amounting to hundreds of millions of dollars were handed out to the big capitalists. In 2012 alone, nearly $90 million went to General Motors Holden.

Mind you, the US experience shows that ‘right-wing’ parties, like the Republicans, are also extremely good at it too. Witness Bush jr’s $700 billion bail-outs to failed financial-services capitalists over there. It doesn’t matter whether it’s Democrats or Republicans, or Labor or Coalition, they will do what it takes with workers’ money to keep zombie capitalism going. Naturally, people become disenchanted with a political party system of that kind and it becomes common to hear phrases such as “No matter who you vote for, you end up with a politician”.

It cannot be disputed that progressive taxation occurs under capitalism and does not in any way challenge the basic set of social relations defining it.

Rerum Novarum, distributism and fascism

By the measure of the notion of fair wealth distribution, the Rerum Novarum of Pope Leo X111, which was formulated in 1891 as a Catholic conservative response to the ills of capitalism and the ascendancy of secular democracy and the growing interest in socialism among the working classes, might also be regarded as ‘Marxist’. Rerum Novarum advocated ‘distributism’, a system in which means of production and property are distributed throughout society as in medieval times, as an alternative to both capitalism and socialism. It was, and is, a desire to return to the era of the guild, an economy centred on small land holdings and artisan production, and based on class collaboration (ie, the peasants/workers ‘accepting their place’ in return for being exploited more nicely).

In Australia, the best known advocate of this system was B.A. Santamaria. In his book, The earth, our Mother (1945), the basis of the new small-scale distributive society was to be the family unit living as close to possible to self-sufficiency on the land. As in medieval times, prior to industrial capitalism, this society would be protected from the ‘corrupting’ influences of big cities and secular materialism by the unifying ‘higher’ spiritual values of the Church. The cooperation of owners and producers would also be cemented through the promotion of nationalism, adherence to custom and tradition, and ethnic solidarity (the folk or volk).

Much of this has resonance today in E. F. Schumacher’s Small is beautiful (1973) and the Green movement. The higher spiritual value from the viewpoint of green ideology is Gaia, or the idea of harmony with, and subservience to, Nature.

Not surprisingly, in the twentieth century, Rerum Novarum and distributism influenced fascist movements, including Italy’s with its corporatist form of tyranny under Mussolini. That influence is also seen in the right-wing social democratic and Christian Democratic commitment to systems of arbitration between workers and owners of means of production. Australia currently has one avowedly ‘distributionist’ parliamentary political party: the Democratic Labour Party. Appropriately, its representative in the federal Senate is a practitioner of one of the medieval era’s ‘mechanical arts’: blacksmithing.

Given that the medieval feudal past cannot – (and should not!) – return, then the quest for more equitable distribution of wealth ends up being a defence of the status quo, capitalism. To socialists influenced by Marxism, capitalism was a revolutionary leap forward from feudalism, because feudalism limited the capacity of individuals to expand their horizons and to be freer. It trapped people in what Marx called “rural idiocy”. At best, from a Marxist perspective, the issue of wealth distribution – the gap ‘between rich and poor’, as the media likes to put it – is useful because it can raise the real question of production rather than distribution, of how value is produced and how it is appropriated. And, from there, why the appropriators need to be expropriated.

The revolutionary nature of capitalism in the nineteenth century

To Marx, capitalism was revolutionary in the way it overturned feudal claptrap and “at last” compelled people “to face with sober senses their real conditions of life and their relations with their kind”.

In the Communist Manifesto, he put it poetically:

“The bourgeoisie has disclosed how it came to pass that the brutal display of vigor in the Middle Ages, which reactionaries so much admire, found its fitting complement in the most slothful indolence. It has been the first to show what man’s activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former exoduses of nations and crusades.

“The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in unaltered form, was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air… “

Industrial capitalism created material conditions that cannot be unmade but only taken further, and social relations that can be overturned and transformed into something new and better.

Marxists are all for progress with a big ‘P’. It’s about the future, not yearning for a ‘small is beautiful’ rural past.

Distribution of wealth and relations of production

Under capitalism, with private ownership of means of production, and production for private profit, distribution of social wealth flows from the relations of production. The resultant scale of inequality can be no other way. Increases in inequality between rich and poor or, more to the point, between the owning class and the working class is part of the system of exploitation of wage labour itself, through which value is created.

“…even the most favorable situation for the working class, namely, the most rapid growth of capital, however much it may improve the material life of the worker, does not abolish the antagonism between his interests and the interests of the capitalist. Profit and wages remain as before, in inverse proportion. If capital grows rapidly, wages may rise, but the profit of capital rises disproportionately faster. The material position of the worker has improved, but at the cost of his social position. The social chasm that separates him from the capitalist has widened…

“Growth of productive capital and rise of wages, are they really so indissolubly united as the bourgeois economists maintain? We must not believe their mere words. We dare not believe them even when they claim that the fatter capital is the more will its slave be pampered. The bourgeoisie is too much enlightened, it keeps its accounts much too carefully, to share the prejudices of the feudal lord, who makes an ostentatious display of the magnificence of his retinue.”

On this last point, I think Marx would reconsider his position were he alive today. The ostentatiousness of the big bourgeoisie is sometimes astonishing – be it in the USA, the Russian Federation or China.

Marx would also be amazed at the material progress that has taken place, especially for the working class, but any great thinker from the nineteenth century would be the same. Marx acknowledged that the material conditions for the workers were improving even in his time. The important point is that the social chasm widens. (There are, of course, plenty of other reasons why capitalism sucks and has outlived its usefulness).

Labour theory of value: Marx meets the Jetsons!

The Marxist labour theory of value (LTV) explains how exchange value is created by labour’s interaction with nature and how, in the capitalist mode of production, wage labour is exploited. Bourgeois economists hate the theory because it lay at the heart of Marx’s analysis of the need for revolution. Capitalism reaches a point where it is a fetter on production – as we have seen for some decades now. Workers as a class without borders have nothing to lose by overthrowing this system based on their exploitation. Some real productivity can then occur, free from the constraints of production geared to the pursuit of private profit. For starters, we’ll be able to mass produce and have our own flying-cars!

I wanted to find a good summary of the theory that wasn’t too scant, and found the following at a non-Marxist economics blog called ‘Unlearning Economics’:

“Marx’s theory goes as follows: under capitalism, the value of commodities is determined by the ‘socially necessary’ amount of labour required to produce them (‘variable capital’), plus the current necessary cost of the capital used up in production (‘constant capital’). Fixed capital, such as machines, adds value at the same rate it depreciates, while raw commodities are used up completely and so add all of their value. Labour is generally paid less than the value it adds, and therefore is the sole source of profit.

“Here’s a brief mathematical example: say an hour of labour adds £1 of value, and a certain type of chair requires 8 hours of labour (‘labour-time’), uses £2 worth of wood and depreciates a saw worth £10 by 1/10th (i.e. after the saw is used 10 times it will break). It follows that, according to the LTV, the value of this chair is:

“(1/10)*£10 + (8*£1) + £2 = £11

“The only way the capitalist can make a profit is to pay the labourer less than the value he creates (for the most part, Marx suggested wages were determined by a social subsistence level). So if the wage is, say, £0.50, the capitalist will have £4 worth of profit. Contrary to what many think, this does not imply that capital-intensive industries will have lower rates of profit, as the rate of profit will tend to equalise between industries, ‘sharing out’ the total surplus value produced in the economy.

“The qualifiers of “necessary” costs and “socially necessary” labour are also important. It’s logically possible that a madman could purchase a saw for £100 for some reason, or that a lazy labourer could take 10 hours to make the chair, but this would do nothing to alter the resultant value of the chair. Marx was concerned with general rules, not specific cases, which could obviously fluctuate wildly as they are based on human behaviour.

“The main implication of this theory is that, since capitalists tend to use labour saving technology to increase productivity, over time they use relatively more constant capital – which cannot be a source of surplus – and this drives down the rate of profit: the Tendency of the Rate of Profit to Fall (TRPF). Though the first capitalist who uses the technology will be able to sell at the market price, and thus gain, once the technology is widely adopted, the value of the commodity will decrease – a ‘fallacy of composition’. Again, this may not be true in particular industries at any one time, but it holds true across the economy as a whole. The result will be intermittent crises as capitalists face lower profits and try to increase them by pushing down wages, devaluing their constant capital, or through technological progress. Marx never predicted capitalism would collapse in on itself, though he did suggest that the working class would revolt as their wages were pushed down”.

Conclusion

A shared prosperity can only spring from common ownership of the means of production. It is not possible under capitalism. The system would grind to a halt. The capitalist would not invest and they would have no incentive to force alienated workers to keep their noses to the grind stone. The system of distribution cannot be separated from the system of ownership.